The ever-evolving RRSP: shifting strategies for younger and older investors

FILE - Canadian $100 bills are counted in Toronto on Tuesday, Feb. 2, 2016. (Graeme Roy /THE CANADIAN PRESS)

TORONTO -- RRSPs play a major role in paving the way to retirement for many Canadians, but strategies for using the long-term savings account will evolve throughout the course of life.

Certified financial planner Jason Heath of Toronto's Objective Financial Partners provides advice to two investors on opposite ends of the spectrum:

Young money: Starting RRSPs on a limited budget

Mark Ocampo, a 33-year-old project manager in Toronto, feels he's falling behind at setting aside money for retirement.

Ocampo says his RRSP contributions are pretty small right now, as he and his partner are more focused on chipping away at the mortgage on their condominium. They're also thinking about a move and trying to save for a down payment on a ground level home.

"I'm putting in a little bit per month into my RRSP, about $50," Ocampo says. "In my 40s, I plan on getting more serious about RRSP investing once we have a house."

In the meantime, he's thankful his employer provides him with a defined benefit pension plan and the option to join a stock sharing program.

"I have limited cash flow right now," says Ocampo. "I'm trying to get the most out of my money."

Savings tips and strategies

As a young person, Heath says Ocampo is making a lot of smart decisions now that will put him in a good position when he later has more disposable income available.

"If you can get used to saving -- and not spending --$100, $250, $500 a month, you won't ever miss that money," Heath says.

Taking advantage of workplace plans is another smart way Ocampo is augmenting his retirement savings.

"If your employer offers a company match on a retirement savings plan, whether an RRSP, defined contribution pension or other savings plan, take it," Heath says. "Don't say no to free money."

Heath says Ocampo may want to focus on fees in order to hold onto more of his investment returns.

"The financial industry is offering more and more investment options to people with less and less money," he says. "Some robo-advisers don't even charge fees on smaller account sizes. You don't need to be a millionaire to invest."

The home stretch: Getting ready to tap your RRSP

John Wilson, 65, retired last year from his job as athletics operations manager at Carleton University. Now, he is thinking about the right time to start unwinding his RRSP.

With his mortgage paid off years ago and his adult children financially secure and independent, Wilson made the most of his RRSP contribution space in his final working years, maxing it out.

But by the end of the year he turns 71, he'll need to convert his RRSP into a Registered Retirement Income Fund, or RRIF, and start withdrawing the money.

"We use an adviser at the bank, so I have to sit down with him and start planning toward that point," he says. "What's the best route? I don't want to support the government any more than the extent that we already do."

How to avoid the tax bite

Heath says early RRSP withdrawals before a mandatory RRIF withdrawal can be a great idea if you're retired and your income is low.

"Paying a bit of tax today, rather than delaying your withdrawals until age 72, may mean you pay less tax over your entire life and increase your lifelong retirement income," he says.

Another tax-efficient strategy is pension income splitting, Heath says. This allows those over the age of 65 to split up to half of their income with their partner -- but to qualify for income splitting the RRSP needs to be converted to a RRIF.

For couples in different tax brackets, pension income splitting allows some of their RRIF income to be taxed in the hands of the lower-earning spouse.

Heath says it's crucial to build a retirement plan that models your future income.

"How much can you afford to spend? What rate of return do you need to earn? How much will you need to withdraw each year from your investments? These are empowering questions to answer."